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tv   Bloomberg West  Bloomberg  January 20, 2015 1:00pm-2:01pm EST

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>> live from pier three in san francisco, welcome to "bloomberg west." i'm cory johnson. a check of the headlines. stocks falling. earnings reports from johnson & johnson morgan stanley coming short of estimates. gold is on a tear but oil is falling precipitously after the imf cut its outlook. >> the traditional sources of demand for oil may not be there going forward. if we are growing at 1%, it does
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mean we will not be seeing as much, but the other thing we have to consider whether it is china or other countries, the efficiency of utilization of fuel. >> meanwhile, china's stimulus measure appears to be working with consumer consumption up last month. facebook is a job creating machine. they say they have helped create 4.5 million jobs around the world. that would include all of the businesses that make money off facebook, according to a study paid for, of course, by facebook. this is after apple claimed it directly or indirectly created more than a million jobs through its app store. amazon is going green. it will use went to power its data centers. the company signed a deal with a wind farm in indiana for the next 13 years. once that farm is built and
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running, amazon will join apple and google in using largely wind energy. nbc is going to try to use the patriots and the seahawks to get more customers. the network is open to leverage the massive interest in the super bowl to leverage streaming platforms. now to google which wants to connect to all corners of the world. they are investing $1 billion in spacex. by joining spacex and its planned arsenal of satellites, google could gain an advantage on companies like facebook trying to do the same thing connect the globe through the skies. joining us now, bryan womack and the president of tms associates. bryan let me start with you.
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>> we have this ground-error war. -- ground-air war. bottom line google wants more people on the internet, no matter who they are. it looks like elon has some things going on here, so why not team up with them? >> the idea of leasing the world together with lower but satellites, -- low orbit satellites this is been to before. back in the day, there were a couple of competing offerings to offer satellite cell phone service to the world. both did not get off the ground. that is not accurate. they failed with massive adoption. why and what may have changed since then? >> yes, in the 1990's, actually at that point, it was not just satellite technology.
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it was the ground terminals. to go to the internet via satellite, you needed satellites that would go across the sky. so, the main asset builder that point in time was issues tracking those. it was expensive for the consumer. today, again, you see the target -- again, they want to get the price down to a couple hundred dollars before that market is really addressable. >> tim, when i was at elon musk's company years ago, the spacex factory, they were talking about launching the satellites. it was notable that the capsule had a window in it so maybe they were thinking of a manned flight. but might this have been the plan all along for spacex? >> i think that spacex has been looking to move into adjacent market.
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it is obviously very good at setting up rockets. it is building on that to build bigger rockets. it has a lot of government funding to do that sort of work. i think this is the obvious next step. if elon works toward his mission of going to mars, they're obviously will be a need to have communication. and google has the expertise in communications technology. they have them working on a lot of things like the drones in the balloons. elon has a lot in making a production line to build satellites and hardware at low cost. so, it is a natural fit to some degree. >> bryan, is this a stretch for google? we know they try things in their google labs, but as a corporation to make an
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investment like this. it's not an experiment. it's not a self driving car. >> what we have to remember about google, they love spending money on whatever they are interested in at the time. to your point, if this works, great. if it doesn't, well, google moves on. they see something here. one billion dollars even for google, with their $60 billion in cash or whatever, that is a pretty big commitment. it shows seriousness that you do not see with everything else they do. >> is this also something that this notion of wiring the world through wireless -- has that been a google project for a while? >> yeah, this project with the blooms in the air. they have talked about this with other things they have acquired. this is something google means. google has grown to lots and lots of folks around the world. they need more people on the internet to use their services. that plays right to their core business. >> they're talking about seeing
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frogs or budweiser ads at the end of the day. when it comes to spacex technology, this is a company that come up unintended, is barely getting off the ground at this point. the crash last week of their jet -- the video came out a couple days later -- it was very exciting attempts to lead this thing on a barge in the atlantic ocean, or as they called it, and autonomous floating drone, but it was a very dramatic crash were they bounce this thing, it skidded off the barge, and landed in the ocean. you tell me. how many satellites are we talking about? how many launches is this require when they have not pulled off their big plans once yet? >> they're talking about round about 4000 satellites. if you are thinking about 50 or 60 satellite, we are talking 70 or 80 launches.
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but clearly they need to sell up -- set up the launch rate. the usable rockets well it will be interesting to see how important the [indiscernible] for the future of this project. but more often than not, that will be the dominant cost for this system. it is really getting the cost down of manufacturing. it is taking a major satellite to a couple million dollars each. that is a $10 million budget. i think that is what we are going to have to say. and yet, they will take on an awful lot. the mission is to go to mars eventually. there are an awful lot of people lined up to launch their satellites into space. those people, they want to get on with the launch rate now.
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this is a bit further down the pike. >> a billion dollars is a good step in the direction of $10 billion. it is not $10 billion yet. thank you. so, ibm reports earnings for the first time since itching its profit roadmap last quarter. what are the three key things we will learn about ibm? that is next on "bloomberg west." ♪
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>> welcome back to "bloomberg west." i'm cory johnson. earnings season is in full swing. one tech company in the spotlight, ibm. the business is 103 years old, but they're struggling in their transition to cloud raised
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world. big blue has yet to pan out. joining us, our correspondent who covers ibm, and quite well i think. this is an interesting quarter because they have kind of clear the deck for -- well, for what? what do you think they will talk about? >> they have clear to the deck for the roadmap. that's for sure. the fourth quarter is not as bad news. it is good news for ibm. we are looking to see if they resolve issues they have had with software which makes three quarters of the revenue growth for the entire company. the fourth quarter, that will be the first question investors have. how did things do? second, what is the allocation strategy? are they looking to take money that they have historically spent on buybacks and dividends and regular -- relegate some of that to rmb? they spend about 6% of sales on r&d. is it time to boost that number
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to go after competitors? third on the docket for them for sure is going to be what is the company going to do in 2015? they throughout the roadmap. rometty needs to come in and lay out a very step-by-step plan to ease the concerns of investors. we saw the shares dropped and a lot of that was after the third-quarter earnings when they throughout the roadmap. that is what we will really be paying attention to in terms of what they have to say after the market close. >> there is a precedent for ibm throwing out not just a roadmap, but the baby and the bathwater when it comes to getting all of the bad news into one order. they had to do this about a year after luke gerstner went to pension accounting. a couple quarters looked really good. then they reported a really really crummy quarter, try to get everything out at once.
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is that still possible? >> we saw some of that last quarter when my colleague and i wrote the news that they are paying to have their struggling microelectronics unit taken. you saw the stock selloff. that may have been the bad news quarter. they are definitely looking for improvement in this business strategy and how they are going to move this take 430 000-employee ship going forward. >> thank you, alex brink of. now i want to turn to netflix. sysop -- subscriber growth. very big number. what is spending going to look like on original programming? our correspondent joins us from los angeles. just this weekend, amazon out there talking about all of these movies they are going to launch, inc. looting in theaters. netflix is raising the cost of
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creating original content. what do we expect from netflix tonight? >> they take the golden age of tv, the golden age of tv reporting. 12 number -- 12 movies he year out of amazon. netflix will be looking to pump up its contents strategy. they say they will double the number of shows they offer to 20 this year. we will see how -- how is "marco polo" doing? it got mixed reviews. is the money spent on content going to grow? those of the numbers people will be looking at today. >> i wonder if they will break out some things. i have seen some wall street reports that try to figure out how much people are using netflix, but cause -- because of course they will not give as numbers. they just tell us that "house of cards" is a great big success. i expect they will tell us "marco polo" is a success
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without any numbers. >> you saw the disappointment in the subscriber additions, and they said they got a big bump early in news inscriptions and then it tapered off. there is definitely a payback for the content, but how much how sustainable it is, that is the big question. >> and on the accounting side, there have been interesting people observing the thing that they did not report in that quarter it well -- at all. the unpaid content and commitment. what do we expect there in terms of what they promised to spend, even though they did not spend that money yet? >> this is a company that recently turned cash flow negative. last quarter they were spending $1.2 billion on content, and that is an extraordinary number. there is a great concern they are overspending. this number is not one they share going forward.
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there will be questions, i'm sure, going forward, on the call today. >> a big quarter for netflix. we are certainly watching that today. straight ahead, one of uber's most controversial policies. surge of pricing. one city councilman was to slam the brakes in one of their most important markets. he joins us next. you are watching lumber, streaming on your phone tablet, apple tv, and amazon fire tv. ♪
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>> i'm cory johnson. this is "bloomberg west." uber's never-ending battle with local governments have back to the all-important market of new york city. legislation will put a cap to their rate increase at 100% of normal. it would be a limit. uber's defended their practice of hiking prices saying that dynamic pricing will make sure that it is available when in demand. joining us from new york, councilman david greenfield. talk to me about why uber should
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not be allowed to charge whatever customers agree to pay. >> effectively they are ripping off their customers. what they called dynamic pricing, we called price gouging. safety, predictability, and we want to prevent the exact kind of price gouging that is happening under uber. >> it's interesting. new york city, of course there are cars with all sorts of surcharges. but when there is insane demand -- new year's eve for example -- taxi drivers famously will hit the off duty sign and charge whatever people are willing to pay. >> for the cab drivers doing that, they are famously breaking the law. >> what is the statue of -- the statute of limitations on that? i did that when i was a cab driver in nyc.
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uber says, because we jacked the rates we get more cars on the road when people want them. >> we are looking for a balance. we do not want them to get charged too much. the main reason we regulate the price to begin with is because the taxi driver is on equal in their ability to charge whatever they want. for example, if they are going to the airport and they turned to the cabbie and the cap he says what time is your flight and the cabbie says i can charge you $500. we think we will get many more cars on the road for uber, but we will also protect consumers which is very important in a major metropolitan ready like new york city. >> does this bill have a shot? >> it has a lot of support, and support not just from the yellow cabs but also from people who are frustrated. and i feel that uber is cutting
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their nose to spite their face. this is a bill that most of their customer support. if you ask them their biggest frustration, it is getting the crazy price surges on nights where new york -- new year's eve where they can pay 15 times more for a cab ride. >> it is interesting, that competition with the taxi drivers who have been bidding up medallion prices. uber makes the argument that the fixed number of medallions in new york city just shows the market is not dynamic and suggests politicians and the taxi-limousine commission are to strengthen maintain a monopoly. >> were not trying to do that. really what we are trying to do is protect consumers. remember there is a reason why this industry is regulated in the world. that is because if you let people charge what they want you can get crazy pricing. the final point i would make --
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uber likes to argue this is what the market will bear. it is not true dynamic pricing. uber artificially sets a limit on bottom-line pricing. therefore the price will never fall below a certain amount. >> it's funny how that works. it can only go up, but it can't go down. what do they say about the proposal? >> they liked the concept. they would like to see tweaks to the legislation specifically on who would pay the penalties and fines. they would like it to go on the basis of subscribers. we agree with them, so we will make those changes and build more support for this legislation. >> last question, really quick. the medallion price has fallen. is that because of uber and ly ft? >> that is part of it, but i think it is part of the change
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in new york city. people are more intermittently catches. they are taking bikes more taking trains more. i think that is hurting the industry as well. >> thank you. europe is also fighting uber. we will have that story next on "bloomberg west." ♪
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>> you are watching "bloomberg west" where we focus on innovation, technology, and the future of his nose. i am cory johnson. present obama will give his state of the union address tonight. while this will feature the regular pomp and circumstance a lot of applause, he will have a new tradition. sitting down with youtube stars. phil mattingly is joining us from washington. >> it's interesting, cory when you look at the white house calculation, there is the recognition as much as the white house is core would love to sit
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down with the present, it makes sense for them to get the message out to people who will not be asking difficult questions and have tens of millions of followers. it's an interesting thing. you see the white house trying to figure out a way to get an address that no longer gets the millions upon millions of viewers it used to to the general public and that is one of the key ways they are doing it. >> is this an equivalent of a barbara walters interview where you get the softball questions on the person tears up but nothing is broken, or could there be serious questions here? >> is not fair to underestimate the type of questions that could be asked. they could come at him on syria policy, health care exchanges or it i don't think it is very likely, but i have not heard anybody say that any of the questions will be screened beforehand. there are no limits on what they can or cannot ask. i think the bigger issue with the white house is looking and has really for the better part
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of the six years the president has been in office, has been looking are ways to get around the regular media. has been looking for ways to get their message out. this is another way to do it. it is a message that does not reach as many people as it used to so here's a way to do it and target a group of people that will not only be supportive of policies and proposals, but push those proposals forward. >> we will know it is jumping the shark if we get questions about their dog, but how ticked off is the traditional media and the traditional venues that still cover the white house like the good old days? >> to be honest at this point, it has just become the norm. i think you recognize this the way the dynamic is shifting and it has for the media as well. we are looking at new ways to reach people through their tablets, different platforms. the white house is doing the same thing here. i think sometimes that may be a little more frustrating to cover the institution, but it also gives them a lot more
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opportunities to present us with information. obviously we would prefer to get it face-to-face, but you have to recognize it is a shifting dynamic. it's not just at the white house. it is on capitol hill. it is frustrating for people who are used to just covering the white house day today. this is the way things are moving and we either have to adapt or get left behind. >> maybe in response vimeo will have their own statement on this to spite you to. [laughter] thanks for joining us. we will have full coverage with a special edition of "with all due respect." president obama's address is at 9:00 on the east coast, 6:00 here in the west. moving across the pond, some of the biggest names in munich, speaking this week. it's a big deal and regulation is a big topic. the uber ceo touched on the need
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for legislation to be updated to deal with emerging technology like uber. they are facing backlash across it europe and the americas. take a listen to what he had to say. >> there has almost been a regulatory capture. there has been a situation where we had a good set of rules that protected people, but then a whole new set of rules that protected and industry. for example in new york city there are 13,000 -- there were 13,250 taxis in the 1950's. we are now 60 years later, and there are 13250 taxis in new york. how did that happen? it happened because the existing incumbent industry made sure it did. they want to create artificial scarcity. >> the european union's commissioner for digital economy
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used google's long-standing problems with european antitrust regulators to explain why they need to do more to comply with existing laws. take a listen. >> in our digital economy they have huge presence. but we have rules. and everybody, every company has to accept it means protectiveness, means frugality, and they have concerns. it should be decided before the end of the year. >> yes, he was there and so was the google cofounder reid hoffman. >> most silicon valley companies are pretty bad at lobbying. they are bad at lobbying
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washington. they are bad at lobbying brussels read we have a tendency to say, what we try to do is build the greatest possible product and we are slow and understanding, what does this mean with the face of government? >> all of that taken place at the conference in munich today. cyber security will be a major theme in tonight's cyber security address, but do businesses care and might they change their strategy after hearing what the president has to say? we will talk about what he might say, next. ♪
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>> i'm cory johnson. this is "bloomberg west." it is a tough balancing act. handing over data related to the "charlie hebdo" investigation microsoft just 45 days after they were asked. microsoft's general counsel says
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that this shows the microsoft system can work and that snooping should only happen if strictly regulated. present obama will address u.s. cyber security concerns tonight. the president recently pushed new cyber initiatives and discussed cyber intelligence sharing with prime minister david cameron this week. well improving cyber security seems to be a top priority for the president, others may not feel the same way. this goes says 75% of chief information security officers feel their tools are very effective. but attacks are only becoming more effective as you political attacks increase. john stewart joins me right now. john -- why do these companies think that they are good when you think that they are not? >> kind of recent developments. first, with an industry that is
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only about 25 years old, what we're looking at is experience that has not been built up throughout all of the companies. our data is starting to show that there is a perception and reality gap where top leaders will see the strategies and operations will be concerned they have not gotten over the goal line. >> is this bravado or do they just want to say this because they do not dare tell anyone they think their systems are weak? >> you have a little bit of that confidence factor where you do not want to's start off by saying, hey, we got it all wrong, let's go from there. this is one of the things in the security report we published. there are whitening security gaps. partly there is the understanding of the top and the understanding at the operations level. >> so, the bosses do not get it less than they did not get it last year? >> partly it is more bosses get it at all. it is becoming a situation where
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they are having conversations about hiebert, which is relatively new -- >> there are a lot of reasons. one is the embarrassment factor the notion that the corporation became the target of a possible -- of a powerful nationstate. there was a new york times story yesterday. they invested a lot of money in going after attacks like this. that must've scared the big jesus out of the board that pays attention to these -- that must have scared the beejezus out of the board that pays attention to these things. >> the corporate directors have talked about -- the fcc has weighed in and said there is a particular respect her for these businesses and it is increasing. the volume of the attacks the number of companies, the number of situations receiving press, and the fact we are having a national dialogue about it completely tells you that boards are getting more and more aware. >> your report is fascinating.
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it talks about intelligence. what is the nature of the kinds of threats we are seeing now? is it that most of them look like this? >> yeah, most of them look like this. then there are the small ones that have heavy impact in high-impact situations. what most look like -- and we all experienced this in our day-to-day life -- you get spam e-mail. the technique being used to deliver it changed last year and the quantity went up by 250%. that change the entire modality -- >> what change? >> technically -- >> this is "bloomberg west." >> i understand completely. it used to be the in's rotation protecting -- the instrumentation protecting copies was when you got volume. tons of it was bailed. if one got in, great. >> so, if we see 300 e-mails that advertise viagra, we know
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that is spam, so we reject them all. >> and then e-mails that come from sites where it is obviously being generated, then you block it. what happened last her, i am going to send the order for e-mails from 1000 different rights, very small, very low. because they are not hitting that volume attack or hitting those bad known addresses -- now it gets to the user. want to gets to the user, then it is game on. if you actually double-click then i might be able to involve you in an attack on the organization locally. >> it seems that the goals are changing too. it is not annoyance or denial of service. it is getting what? >> a couple things. one, remember this is an economic discussion all the way. it always has been. it i am very favorable of the discussion that says that this is money. that is a big piece of this. at money and multiple forms.
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it can be property, stealing credit card numbers. it can be any characterization. there are other ones. there is the embarrassment factor that you mentioned. there can be "i want to disrupt your business." denial of service attacks against banks denial of service attacks in france over the last couple of days. those will interfere with the normal job you wanted to do. last, but certainly not least, i want to change the way that your business operates in a negative way. >> these are very interesting times. thank you. john stewart, cisco's chief security officer. thank you very much. breaking news -- orbits exploring a -- orbitz exploring a sale. julie hyman is on top of this in new york. julie? >> with saws shares trading up, but now we have been halted for volatility. there was too much trade after
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the headlines began to cross. shares were up about 11% before that halt happened. ortibitz operates orbitz.com and cheaptickets.com. the company has about a billion dollars. according to those familiar with the plans, they have gotten interest from private equity funds as well as other internet companies, but we do not know exactly who and analysts are estimating the company will make a record $932 million in revenue for this year as we see a pickup in u.s. trouble. remember, it did have private equity owners in the past -- it was part of travel port, which was a blackstone company that bought it in 2006 and they went public in 2000 seven. watching the action here -- it looks like the shares have resumed trading. usually these volatility halts are pretty brief. at the moment they are up by 12%, cory.
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>> julie hyman, thank you very much. we appreciate that breaking news. more and more mobile phones are getting hacked. should your business he worried? we have that next. ♪\
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>> i'm cory johnson and this is "bloomberg west." mobile threats are up 75% according to a new report by mobile security lookout. and you threatened by a new threat by rain somewhere. yes, ran somewhere. -- ransom ware. >> the biggest threat to individuals is now letting bad apps to your phone. they can take your money, keep it hostage. >> other they take it hostage? >> it is one of the biggest trends we have seen particularly in the u.s. it is 7% annualized -- >> 7% of u.s. smartphones are infected or getting hacked?
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>> we estimate 60 million android users around the world. seven percent of our users in the u.s. got some sort of malware on their phone. one of the biggest trends now increasing, we have this trend we call ransomware. it may be an app you download to your phone. it is most often seen in on a graphic apps. as soon as you install it, it will take over your phone lock you out, and charge you several hundred dollars to get access back to your phone. >> this is only happening on the android phones, not the iphone? >> since android phones are so much more popular, they can in fact -- infect the most vectors. we see ios risk now being what
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android was in 2010. they are just starting to be targeted. many people will download apps and bypass the app store protections. >> there is a big business on the other side of that. what is that business? >> it is very big and very broad. it is like trying to classify all crime in the world. we see risks to individuals. the risk is bad guys stealing your data. >> they do not care about people. they care about businesses because that is what the show was for, to help people understand how technology is changing business. >> that's true. historically and i see you have a separation between enterprise technology and i.t. technology. what we see when we talk to
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chief security and information officers, their biggest concern is people bringing malware that they may have downloaded an app on their personal phone, then bringing it into the internal corporate network. you have all of this investment in firewalls and corporate infrastructure and one bad phone -- >> we have seen a really dramatic thing in the last few weeks really. the north korean attack the presumed north korean attack on sony. it was really targeted at that business. it was not something an individual got involved in. are we seeing a changing threat across the board and who is doing that and what they are after? >> two major actors are cyber criminals and state-sponsored actors, but sometimes they blend together and it is hard to tell. there is really large growth. in the case of google. google widely reported they believe they were hacked by china, as far as a
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state-sponsored attack. whereas in other cases, you have anonymous banks being targeted, often eastern european criminal gangs. for a business, this is a big problem. anytime there is a large amount of resource but on targeting them, it raises them up. while android for example -- we see a lot more threats to the average user where the bad guys are targeting a metric ton ios versus android, there are infinite risks. >> interesting and i guess it starts to reflect these geopolitical risks in these states, the eastern europe the warmer soviet union, where the blending of politics and crime is not a small thing. >> when people have skills where they can break into computers, they will find ways to use it -- either on the defensive side or governments are hiring
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hackers because cyber wars are a big engagement for nations nowadays. >> it is time for the b-west s yte, one number that tells us a lot. the number is what? >> 2.9 million. >> exactly? >> that is how much google spent on lobbying in washington. >> on lobbying? that is a lot on lobbying. >> it is on pace for a new record for apple, which underscores how much present a have in the city. >> steve jobs really kept the government at arms length. >> under tim cook, that is changing. he is trying to get apple out. they are the world's largest company and they have a lot more issues with the smart watch and health data. >> the health stuff has not taken off the way the height indicated -- the hype
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indicated. >> we may see more. >> when? >> march-ish. >> they said the first half of the year. >> the excitement is building. you can tell that. do you think health is the main focus of this effort? >> a used to be a variety of issues. they used to do six agencies but now they do more than 13. they are going to the ftc, for example, talking about data and private and meeting with lawmakers on the hill, showing them the devices and just being out there more and being more proactive. >> with these issues of technology, they are exploding in everything, including politics. >> yes. >> thank you very much. you can get the biggest headlines all the time on bloomberg.com. tune in for more "bloomberg west " tomorrow. ♪
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>> welcome. we have full coverage of the stocks and stories making headlines today. another drop in crude oil

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